Fewer homeowners are starting the New Year off with a foreclosure this year than did last year, according to a report from CoreLogic. Analysts attributed the decline to “strong job growth and prudent mortgage underwriting.” The decline in foreclosures is not just an indicator of stronger financial health on the part of homeowners. It is also an indicator that more homebuyers are likely to enter the housing market in 2018 since an increasing number of what the industry has termed “boomerang buyers” may be hoping to snag their piece of the American Dream once again.

What are Boomerang Buyers?

Boomerang buyers refers to the population of homeowners who were forced into foreclosure when the housing bubble burst in the mid-2000s. Many of these homeowners had good credit records and a strong history of on-time, in-full payments prior to their foreclosures, but lost their homes due to the financial meltdown when they lost their jobs or their monthly mortgage payments rose due to adjustable mortgage rates (ARMs). About 1.5 million of these homeowners will once again be eligible for mortgage financing in 2018 as the detrimental effects of their foreclosures and other credit issues start to fade.

Interestingly, boomerang buyers are four times more likely to finance with FHA loans than other buyers, according to CoreLogic. Not surprisingly, most of these buyers are currently renting, so they are particularly likely to start moving back toward homeownership in markets where rental rates and monthly mortgage payments are similar.

What Investors should Know

Real estate investors will likely find these buyers particularly attracted to properties eligible for FHA financing and to creative financing options, since many do not realize that they can, once again, qualify for a mortgage. CoreLogic’s analysts noted that they are likely to be in their early 50’s (since the average age of a homeowner who lost a home to foreclosure during the recession was 45) and that they rely heavily on references when choosing a real estate professional. While these observations may, at first, seem geared mainly toward real estate agents, investors may also benefit from working with these buyers because they are often ideally suited to rent-to-own transactions.

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Tags | CoreLogic | Data
  • Carole VanSickle Ellis

    Carole VanSickle Ellis serves as the news editor and COO of Self-Directed Investor (SDI) Society, a membership organization dedicated to the needs of self-directed investors interested in alternative investment vehicles, including real estate. Learn more at SelfDirected.org or reach Carole directly by emailing Carole@selfdirected.org.

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